M/s. Laxmi Udyog, Dahod V. The Income tax Officer,Ward-1, Dahod

ITA 3376/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5703 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 10-10-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDAR
• Section: 143(3)

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM M/S LAXMI UDYOG, P.B. NO.48-A, CHAKALIYA ROAD, DAHOD. VS. INCOME-TAX OFFICER, WD-1, DAHOD. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI SAKAR SHARMA, AR REVENUE BY:- SHRI K. MADHUSUDAR, SR.DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- (1) THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRM ING ACTION OF AO ADOPTING YIELD AT 70% WITHOUT POINTING OUT ANY D EFECT IN THE BOOKS OF ACCOUNTS MAINTAINED. (2) THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN SUSTAIN ING DISALLOWANCE TO THE EXTENT 3% OF TOTAL WAGES PAID. (3) THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN SUSTAIN ING DISALLOWANCE OF RS.11,974/- OUT OF TELEPHONE EXPENS ES. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A PAR TNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING OF UDA D AND MOONG DAL. RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME O F RS.3,52,700/- ON 18.10.2005. ASSESSMENT U/S 143(3) WAS COMPLETED ON 30.11.2007 ON AN ITA NO.3376/AHD/2008 ASST. YEAR :2005-06 2 INCOME OF RS.24,79,647/-. THE AO HAD MADE ADDITION ON ACCOUNT OF UNDER PRODUCTION OF UDAD AND MOONG DAL TO THE EXTEN T OF RS.19,94,228/-. THE AO NOTICED THAT THE ASSESSEE HAD SHOWN YIELD OF UDAD DAL AT 60.31% ON A TOTAL PRODUCTION OF 6,389.70 KGS. ON THE OTHER HAND, ASSESSEE HAD SHOWN YIELD OF 73.10% IN ASST. YEAR 2003-04 AND 71. 34% IN ASST. YEAR 2004-05. THE GP RATE DECLARED BY THE ASSESSEE WAS A LSO LOWER THIS YEAR. IT HAD DECLARED A GP RATE OF 5.50% ON SALES OF 729.18 QUINTALS AS AGAINST 7.98% ON SALES OF 564.32 QUINTALS IN ASST. YEAR 200 4-05 AND 7% ON SALES OF 551.28 QUINTALS IN ASST. YEAR 2003-04. THE AO AL SO GAVE EXAMPLE OF OTHER SIMILAR CONCERN NAMELY M/S ANNAPURNA ENTERPRI SES, DAHOD, WHICH HAS SHOWN YIELD OF 72.2%. ACCORDINGLY THE AO ADOPTE D YIELD OF 70% AND WORKED OUT UNDER PRODUCTION AND PROPOSED OF ADDITIO N OF RS.19,94,228/-. 3. BEFORE LD. CIT(A) IT WAS SUBMITTED THAT AO HAS N OT CONSIDERED THE OPENING AND CLOSING STOCK WHILE WORKING OUT THE YIE LD. AFTER ADJUSTING OPENING AND CLOSING STOCK LD. CIT(A) DETERMINED THE YIELD OF UDAD DAL AT 63.19%. THE LD. CIT(A) OBSERVED THAT IF PRODUCTION OF UDAD DAL IS INCREASED THEN THERE WOULD BE CONSEQUENTIAL REDUCTI ON OF CHUNI-BHUSI. THE NECESSARY ADJUSTMENT HAS TO BE MADE THEREIN. HE ACCORDINGLY GAVE FOLLOWING DIRECTIONS:- 4.4.2 CONSIDERING THESE FACTS THE AO WAS JUSTIFI ED IN ADOPTING THE YIELD OF 70% AS OBTAINING IN THE CASE SIMILARLY PLACED MA NUFACTURERS OF SIMILAR PRODUCTS. HOWEVER, I AM IN AGREEMENT WITH THE APPEL LANT THAT AS THERE IS ALMOST NO QUANTITY VARIATION IN INPUT AND OUTPUT, T O THE EXTENT THE YIELD HAS BEEN INCREASED I.E.6.81%, THE PERCENTAGE OF CHU RI WOULD STAND DECREASED AND CONSEQUENTLY THE HIGHER SALE OF CHURI DECLARED IN THE RETURN WOULD HAVE TO BE REDUCED ACCORDINGLY. THE AO MAY RECOMPUTED THE DISALLOWANCE ON AFORESAID LINES. THE GROUND IS THUS PARTLY ALLOWED. 3 4. AGAINST THIS, LD. AR SUBMITTED THAT LD. CIT(A) H AS CONFIRMED THE REJECTION OF BOOKS WITHOUT POINTING OUT ANY DEFECT. MERELY BECAUSE YIELD IS LOW AO CANNOT RESORT TO ESTIMATION OF INCOME. 5. AS AGAINST THIS, LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. ON THE ISSUE OF REJECTION OF BOOKS, WE N OTICE THAT ASSESSEE HAS ALSO NOT POINTED OUT BEFORE THE AO WHETHER IT IS MA INTAINING COMPLETE RECORDS INCLUDING QUALITY AND QUANTITY OF RAW MATER IAL PROCURED, MANUFACTURED AND SOLD. NO SPECIFIC GROUND WAS RAISE D BEFORE LD. CIT(A) REGARDING REJECTION OF BOOKS AND ASSESSEE HAVING NO T POINTED OUT THAT IT IS MAINTAINING QUALITY WISE AND QUANTITY-WISE RECORD A T EVERY STAGE OF PROCESSING AND MANUFACTURING, WE UPHOLD THE REJECTI ON OF BOOKS AND CONFIRM THE ORDER OF LD. CIT(A) IN THIS REGARD. 7. REGARDING ADDITION IN GP WE NOTICE THAT LD. CIT( A) IS REASONABLE IN DIRECTING THE AO TO REDUCE THE ADDITION BY ADJUS TING PRODUCTION IN BHUSI-CHUNI AND ALSO BY CORRECTING YIELD TO 63.19 % SHOWN BY THE ASSESSEE. 8. THE LD. AR COULD NOT POINT OUT THAT HOW THE ORDE R OF LD. CIT(A) IN THIS REGARD IS INCORRECT. THIS GROUND OF ASSESSEE I S ACCORDINGLY REJECTED. 9. GROUND NO.2 RELATES TO SUSTAINING OF DISALLOWANC E TO THE EXTENT OF 3% OF TOTAL WAGES PAID. IN OUR CONSIDERED VIEW ONCE ADDITION IN TRADING ACCOUNT/MANUFACTURING ACCOUNT AFTER REJECTING THE B OOKS IS DONE, THEN THERE IS NO CASE FOR MAKING FURTHER ADDITION OUT OF WAGES. ALL SUCH ADDITIONS ARE COVERED IN GROSS PROFIT ADDITIONS. TH IS ADDITION IS ACCORDINGLY DELETED. THIS GROUND OF ASSESSEE IS ALL OWED. 4 10. GROUND NO.3 RELATES TO DISALLOWANCE OUT OF TELE PHONE EXPENSES AT RS.11,974/-. THE AO AND LD. CIT(A) HAD CONFIRMED 1/ 10 TH OUT OF TOTAL EXPENDITURE CLAIMED. 11. IN OUR CONSIDERED VIEW THIS IS REASONABLE AS BU SINESS PURPOSES ON ENTIRE CLAIM HAS NOT BEEN ESTABLISHED. THIS GROUND OF ASSESSEE IS ACCORDINGLY REJECTED. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 02/07/2010 SD/- SD/- (MAHAVIR SINGH) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED :02/07/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD